Correlation Between Aedas Homes and INTERSHOP Communications

Can any of the company-specific risk be diversified away by investing in both Aedas Homes and INTERSHOP Communications at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aedas Homes and INTERSHOP Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aedas Homes SA and INTERSHOP Communications Aktiengesellschaft, you can compare the effects of market volatilities on Aedas Homes and INTERSHOP Communications and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aedas Homes with a short position of INTERSHOP Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and INTERSHOP Communications.

Diversification Opportunities for Aedas Homes and INTERSHOP Communications

0.34

Correlation Coefficient

Aedas Homes  INTERSHOP Communications

Weak diversification

The 3 months correlation between Aedas and INTERSHOP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications and Aedas Homes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aedas Homes SA are associated (or correlated) with INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of Aedas Homes i.e., Aedas Homes and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between Aedas Homes and INTERSHOP Communications

Assuming the 90 days horizon Aedas Homes is expected to generate 3.9 times less return on investment than INTERSHOP Communications. But when comparing it to its historical volatility, Aedas Homes SA is 1.32 times less risky than INTERSHOP Communications. It trades about 0.01 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  179.00  in INTERSHOP Communications Aktiengesellschaft on September 3, 2024 and sell it today you would earn a total of  6.00  from holding INTERSHOP Communications Aktiengesellschaft or generate 3.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aedas Homes SA  vs.  INTERSHOP Communications Aktie

Aedas Homes SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aedas Homes SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aedas Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

INTERSHOP Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aedas Homes and INTERSHOP Communications

The main advantage of trading using opposite Aedas Homes and INTERSHOP Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, INTERSHOP Communications can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in INTERSHOP Communications will offset losses from the drop in INTERSHOP Communications' long position.

The idea behind Aedas Homes SA and INTERSHOP Communications Aktiengesellschaft pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.